“We exceeded our guidance ranges for revenue and profitability in the
second quarter,” said Marcus Ryu, chief executive officer, Guidewire
Software. “During the quarter, we extended our overall market momentum
and demonstrated particular success with our cloud and digital
initiatives, completing another InsuranceSuite Cloud deal and signing
significant new business for digital enablement. We continue to invest
in Guidewire Insurance Platform to service the growing demand we see for
cloud-based core systems and to strengthen our role as a trusted partner
for enabling digital transformation in the $2 trillion global P&C
industry.”

As of the first quarter of fiscal 2019, Guidewire began reporting
results under Accounting Standards Codification Topic 606, Revenue
Recognition (“ASC 606”), using the modified retrospective method.
Financial results for reporting periods prior to fiscal year 2019 are
presented as previously disclosed in conformity with then existing
guidance.

Second Quarter Fiscal 2019 Financial Highlights

Revenue

Total revenue for the second quarter of fiscal year 2019 was $169.3
million, an increase of 3% from the same quarter in fiscal year 2018.
License and subscription revenue was $87.1 million, an increase of 3%;
services revenue was $60.9 million, an increase of 1%; and maintenance
revenue was $21.3 million, an increase of 11%.

Profitability

GAAP loss from operations was $5.5 million for the second quarter of
fiscal year 2019, compared with a $0.7 million loss in the comparable
period in fiscal year 2018.

Non-GAAP income from operations was $26.1 million for the second
quarter of fiscal year 2019, compared with a $32.0 million non-GAAP
income in the comparable period in fiscal year 2018.

GAAP net income was $0.8 million for the second quarter of fiscal year
2019, compared with a $45.6 million loss for the comparable period in
fiscal year 2018, which was adversely impacted by the effects of the
provisions of The Tax and Jobs Act passed in December 2017. GAAP net
income per share was $0.01, based on diluted weighted average shares
outstanding of 82.2 million, compared with a $0.59 net loss per share
for the comparable period in fiscal year 2018, based on diluted
weighted average shares outstanding of 76.9 million.

Non-GAAP net income was $27.9 million for the second quarter of fiscal
year 2019, compared with $25.5 million non-GAAP net income in the
comparable period in fiscal year 2018. Non-GAAP net income per share
was $0.34, based on diluted weighted average shares outstanding of
82.2 million, compared with a $0.33 net income per share in the
comparable period in fiscal year 2018, based on diluted weighted
average shares outstanding of 76.9 million.

Liquidity

The Company had $1.24 billion in cash, cash equivalents, and
investments at January 31, 2019, compared with $1.26 billion at
July 31, 2018. The Company used $13.0 million in cash from operations
during the six months ended January 31, 2019.

Business Outlook

Guidewire is issuing the following outlook for the third fiscal quarter
and fiscal year of 2019 based on current expectations:

The webcast will be archived on Guidewire’s website (www.guidewire.com)
for a period of three months.

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures:
Non-GAAP operating income (loss), Non-GAAP net income (loss), Non-GAAP
income tax provision (benefit), and Non-GAAP net income (loss) per
share. Non-GAAP operating income (loss) excludes stock-based
compensation and amortization of intangibles. Non-GAAP net income
(loss), Non-GAAP income tax provision (benefit), and Non-GAAP net income
(loss) per share also exclude the amortization of debt discount and
issuance costs from our convertible notes and the related tax effects of
the non-GAAP adjustments. The estimated annual tax rates used in the
business outlook to compute GAAP and Non-GAAP net income exclude
discrete items such as forecasted tax benefits related to stock-based
compensation.

Guidewire believes that these non-GAAP financial measures provide useful
information to management and investors regarding certain financial and
business trends relating to Guidewire’s financial condition and results
of operations. The Company’s management uses these non-GAAP measures to
compare the Company’s performance to that of prior periods for trend
analysis, for purposes of determining executive and senior management
incentive compensation and for budgeting and planning purposes. The
Company believes that the use of these non-GAAP financial measures
provides an additional tool for investors to use in evaluating ongoing
operating results and trends and in comparing the Company’s financial
measures with other software companies, many of which present similar
non-GAAP financial measures to investors.

Management of the Company does not consider these non-GAAP measures in
isolation or as an alternative to financial measures determined in
accordance with GAAP. The principal limitation of these non-GAAP
financial measures is that they exclude significant expenses and income
that are required by GAAP to be recorded in the Company’s financial
statements. In addition, they are subject to inherent limitations as
they reflect the exercise of judgment by management about which expenses
and income are excluded or included in determining these non-GAAP
financial measures. Guidewire urges investors to review the
reconciliation of its non-GAAP financial measures to the comparable GAAP
financial measures, which it includes in press releases announcing
quarterly financial results, including the financial tables at the end
of this press release, and not to rely on any single financial measure
to evaluate the Company’s business.

About Guidewire Software

Guidewire delivers the industry platform that P&C insurers rely upon to
adapt and succeed in a time of accelerating change. We provide the
software, services, and partner ecosystem to enable our customers to
run, differentiate, and grow their business. We are privileged to serve
more than 350 companies in 40 countries. For more information, please
visit www.guidewire.com
and follow us on twitter: @Guidewire_PandC.

This press release contains “forward-looking statements” within the
meaning of the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995, including but not limited to, statements
regarding our financial outlook, market positioning and future
investments. These forward-looking statements are made as of the date
they were first issued and were based on current expectations,
estimates, forecasts and projections as well as the beliefs and
assumptions of management. Words such as “expect,” “anticipate,”
“should,” “believe,” “hope,” “target,” “project,” “goals,” “estimate,”
“potential,” “predict,” “may,” “will,” “might,” “could,” “intend,”
variations of these terms or the negative of these terms and similar
expressions are intended to identify these forward-looking statements.
Forward-looking statements are subject to a number of risks and
uncertainties, many of which involve factors or circumstances that are
beyond Guidewire’s control. Guidewire’s actual results could differ
materially from those stated or implied in forward-looking statements
due to a number of factors, including but not limited to, risks detailed
in Guidewire’s most recent Forms 10-K and 10-Q filed with the Securities
and Exchange Commission as well as other documents that may be filed by
the Company from time to time with the Securities and Exchange
Commission. In particular, the following factors, among others, could
cause results to differ materially from those expressed or implied by
such forward-looking statements: the market for our software may develop
more slowly than expected or than it has in the past; quarterly and
annual operating results may fluctuate more than expected; seasonal and
other variations related to our revenue recognition may cause
significant fluctuations in our results of operations and cash flows;
our reliance on sales to and renewals from a relatively small number of
large customers for a substantial portion of our revenue; our services
revenue produce lower gross margins than our license and maintenance
revenue; assertions by third parties that we violate their intellectual
property rights could substantially harm our business; we face intense
competition in our market; weakened global economic conditions may
adversely affect the P&C insurance industry including the rate of
information technology spending; our product development and sales
cycles are lengthy; the risk of losing key employees; changes in foreign
exchange rates; general political or destabilizing events, including
war, conflict or acts of terrorism; changes in accounting guidance on
revenue recognition, such as contained in ASC 606, have and may cause us
to experience greater volatility in our quarterly and annual results;
and other risks and uncertainties. Past performance is not necessarily
indicative of future results. The forward-looking statements included in
this press release represent Guidewire’s views as of the date of this
press release. The Company anticipates that subsequent events and
developments will cause its views to change. Guidewire undertakes no
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. These forward-looking statements should not be relied upon as
representing Guidewire’s views as of any date subsequent to the date of
this press release.

(1) Adjustments relate to amortization of acquired intangibles and
stock-based compensation recognized during the period for GAAP purposes.(2)
Adjustments reflect the amortization of debt discount and issuance costs
related to the issuance of our Senior Convertible Notes recognized
during the period for GAAP purposes.(3) Adjustments reflect the
tax benefit (provision) resulting from all non-GAAP adjustments.(4)
Due to the occurrence of a net loss on a GAAP basis, potentially
dilutive securities were excluded from the calculation of GAAP earnings
per share, as they would have an anti-dilutive effect. However, as net
income was earned on a non-GAAP basis, these shares have a dilutive
effect on a non-GAAP earnings per share and are included here.

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Outlook

The following tables reconcile the specific items excluded from GAAP
outlook in the calculation of non-GAAP outlook for the periods
indicated below: